The strength of the U.S. dollar allowed Americans to consume foreign goods and travel to exotic lands. Now the dollar is at year-plus lows. If it stays this way, it could change our economy and which exchange traded funds (ETFs) we choose.
There could be some big motivation for keeping the dollar weak.
A large portion of American companies do big business overseas, so profits will in large part come from the strength of foreign currency as the U.S. dollar withers. All of a sudden, these multi-national corporations are looking at emerging markets as a source of income instead of places where cheap labor can be had, explains Gary Gordon for ETF Expert.
Gordon poses the question: Are we purposely growing America by letting the U.S. dollar slip? (How to play a weak dollar).
Although the U.S government would never admit that, there are not any actions or words to indicate urgency in reversing this trend. The biggest risk to this cycle continuing is that it could lead to a lack of interest in foreign investment. (Why foreign countries want a strong dollar).
For now, the Federal Reserve doesn’t see importers passing along their higher costs to consumers in the current environment, which is one reason that traditional inflation may remain subdued. Market-based wealth is dependent upon a weaker dollar, the U.S. economy is relying on the stabilization of the U.S. dollar. Is there a happy medium?
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